Hospitals could lose $500M in federal funds

The Associated Press

Published: Monday, May 13, 2013 at 10:12 p.m.

Last Modified: Monday, May 13, 2013 at 10:12 p.m.

MIAMI — Hospitals nationwide could lose half a billion dollars in federal funding for uninsured patients next year under the national health overhaul — a loss that will hit especially hard in states that decided against expanding Medicaid coverage. Cuts could jump to $4 billion in 2020, according to estimates released Monday by federal health officials.

Hospitals that treat a large number of uninsured residents have relied on federal funding in the past to offset the cost. But the Affordable Care Act assumes that more residents will have Medicaid or private health insurance, meaning hospitals would see fewer uninsured patients and need less assistance.

But hospitals in states that declined to expand Medicaid — such as Florida, Texas and Pennsylvania — stand to lose the federal funding without a corresponding increase Medicaid-covered patients to offset it. The decision not to expand means potentially millions of residents in those states who would have been eligible for the expanded Medicaid coverage will continue going to the emergency room when they are sick — and hospitals will be stuck with the bill.

As originally written, the Affordable Care Act required states to accept the Medicaid expansion as a condition of staying in the program. But a Supreme Court decision last summer gave each state the right to decide.

So far, 21 states plus Washington, D.C., have accepted the expansion, while 14 states have turned it down. Another 15 states are still weighing options.

Among the states that aren't expanding Medicaid, Texas hospitals could lose more than $56 million next year, Pennsylvania's could lose nearly $34 million, Missouri's could lose about $26 million, Alabama's may lose $17 million and Florida hospitals could stand to lose more than $10 million, according to rough estimates from the Department of Health and Human Services.

"You have continuing high levels of uncompensated care but the funding you had designated to address it is shrinking so the amount of unmet costs will grow," said Bruce Rueben, president of the Florida Hospital Association.

The formula determining cuts in each state is complicated, but generally states that have a smaller number of uninsured patients will receive larger reductions than states with high numbers of uninsured patients. States have broad discretion to distribute the payments to hospitals and the allotments also vary greatly among states, so part of the federal health law "reforms federal payments to states to help pay for uncompensated care for uninsured and low income populations," federal officials said in a statement.

They also noted Monday that some states are still trying to decide whether to expand Medicaid, which will impact the formulas used to decide how much money to cut from each state. Because of that, federal health officials only proposed formulas for cuts for the next two years.

Health experts are divided in their opinions of what will happen next.

Judy Solomon, vice president of health policy for the Center on Budget and Policy Priorities, a liberal think tank, said the new regulations could mean that states that don't expand Medicaid will get a break and face smaller cuts compared to states that are expanding Medicaid. But even if that's true, she said hospitals will still be in trouble.

"In the states that don't expand Medicaid, even though the DSH cut may be relatively lower than had they had expected, they're still going to be worse off because of the large number of uninsured people who are still going to need services and the fact that the hospitals will still be receiving a cut," Solomon said.

But Rueben said he doesn't think the feds will take pity on states that choose not to take them up on their generous offer to pay for Medicaid expansion. Under the federal health law, the federal government is offering to pay 100 percent of the coverage for newly eligible Medicaid recipients for the first three years and at least 90 percent after that.

"For those states that willfully deny their own citizens coverage when it was so substantially paid for...(the feds) will not protect those states from their own bad decision," he said. "How does that make good policy sense?"

The American Hospital Associated has asked the feds to hold off on the cuts for two years until they have a better handle on what states are doing with their Medicaid programs.

Reader comments posted to this article may be published in our print edition. All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.